Some industries lack adequate disability coverage

Workers within the manufacturing, health care and education sectors tend to lack adequate disability coverage, which could pose major risks to their financial protection, according to an analysis by Colonial Life.

Typically, manufacturing workers buy approximately half the amount of disability coverage they need, the analysis finds.

Disability coverage generally covers 60 percent of one’s income, but manufacturing employees tend to buy only enough coverage for 33 percent of their pay. Meanwhile, education workers only buy enough disability coverage for 37 percent of their income, while health care employees purchase enough for 37 percent of their income.

“These three industries alone represent more than 37 million working Americans who may be underinsured in the event of a disability,” said Steven Johnson, assistant vice president for product development at Colonial Life. “This kind of coverage gap puts them at tremendous risk, especially considering that more than half of all households say they couldn’t raise $2,000 a month if needed.”

Figures by the Bureau of Labor Statistics reveal that two-thirds of private-sector American workers do not have employer-sponsored disability insurance that would protect their pay in cases of illness or injury. Most Americans believe accidents are the leading cause for disability claims, but illnesses are actually the top reason.

“The likelihood of experiencing a disability — whether short-term or long-term — is much more common than you might think,” Johnson said. “Although many businesses provide some form of group long-term disability coverage, there may be a coverage gap between the end of sick leave and the beginning of long-term disability coverage. Products such as voluntary short-term disability insurance can help employees fill the gap.”

For short-term disability, Colonial Life recommends that employers find a product with guaranteed issue and no health underwriting questions. This ensures employees are covered by simply following minimum participation guidelines and meeting eligibility requirements. Employees should have the capability to move the coverage if they leave their jobs and have the protection if they become disabled and can no longer perform their specific jobs rather than just any job.

Good short-term disability plans also include incentives to return to work, Colonial Life says, and the plan should complement long-term disability coverage by offering multiple elimination periods to address any gaps from when paid time off or sick leave stops and long-term disability coverage begins.